Mercedes-Benz to invest $302 million in South African car production

German carmaker Mercedes-Benz is set to invest R3 billion ($302 million) in its South African operations to increase local output to 100,000 units annually.

Currently producing 60,000 units on an annual basis, the company plans to add new technology and a third shift to its local plant to increase the production.

Mercedes-Benz South Africa chief executive Martin Zimmermann said that lost production from the strike in 2013 would be recovered by Mercedes in six to seven weeks.

“We have quite a significant order book,” Zimmermann added.

Besides this, the luxury carmaker announced in October 2013 that it will build a new production plant in Iracemápolis, São Paulo, Brazil, to manufacture Mercedes-Benz cars for the local market.

The company signed a framework contract with Brazilian President Dilma Rousseff for establishing the plant. It plans to invest €170 million in the plant during the first phase.

The plant will produce the company’s next-generation C-Class and GLA vehicles with the first production being planned in 2016. It will have an annual production capacity of 20,000 vehicles, and it is expected to create 1,000 new jobs.

Mercedes’s commitment to South Africa came less than two weeks after BMW, the world’s largest maker of luxury vehicles, said it would stop expansion in South Africa after labour strikes that shut down plants in August and September 2013 cost it 13,000 cars in lost production. BMW’s revised plans are a “worrying sign”, Finance Minister Pravin Gordhan said in October 2013.

South African vehicle sales will probably stagnate in 2014 as slower economic growth and the weak rand stifle consumer spending, according to the National Association of Automobile Manufacturers of South Africa.

“The economic indicators are just against us at the moment,” Naamsa Chairman Johan van Zyl said in an interview at the Johannesburg International Motor Show. Vehicle sales would show “zero growth” 2014 after an estimated 5 percent advance to 650,000 units in 2013, he said.

Ford Motor Company global president and CEO Alan Mulally, in an interview with Business Day on the opening day of the Johannesburg International Motor Show, said the company had no plans to cut back on its operations in South Africa.

Mulally told Business Day that Ford’s assembly plant in Silverton, Pretoria remained key to its global operations, and “suggested that its importance could grow, following a decision to create a new Ford division for the Middle East and Africa.

The company’s Silverton plant, along with its engine plant at Struandale outside Port Elizabeth, produces Ford Ranger pickup trucks for export to 148 countries, mainly in Africa and Europe.

Mulally said the group had no plans to start manufacturing elsewhere in Africa.